Switching from a SEP to a 401(k)"While a SEP may be the perfect plan type for some situations, many employers who start with a SEP later realize that a 401(k) plan may actually help the owners better meet their objective of maximizing contributions to themselves at a lower contribution obligation for the employees.... A SEP may be terminated at any time and all funding can stop once the plan is terminated.... No notice has to be provided to the IRS about the SEP termination. Employees may take a distribution from the SEP or may roll their SEP account into the new 401(k) plan or into an IRA." (Retirement Management Services)

The Top Three Retirement Plans for Small Businesses"The 401(k) Plan offers the most flexibility (and high contribution limits) ... SEP IRAs are pretty easy to start and 100% funded by the employer.... The SIMPLE IRA is a solid, affordable option." (Butterfield Schechter LLP)

[Guidance Overview] Second Fiduciary FAQs Package Issued in Final Days Before DOL Transition"FAQ II deals specifically with the final regulations. Unfortunately, FAQ II did not answer all of the questions posed by industry practitioners. For example, absent was clarification of how the DOL views its conflict-of-interest guidance in the context of employer-sponsored retirement plans that employ IRAs as their investment vehicles. This includes simplified employee pension (SEP) plans and savings incentive match plan for employees of small employers (SIMPLE) plans. Nonetheless, FAQ II does provide many hoped-for clarifications." (Ascensus)

Retirement Plans Comparison Table for Small Businesses, 2017 Plan Year"This table provides a comparison of the features and benefits that apply to retirement plans that can be sponsored/adopted by small business owners. Focus is on the areas that are important to the business owner, so as to help ensure that the plan that is chosen is the plan that is most suitable for the business. Plans covered: SEP IRAs; SIMPLE IRAs; 401(k)s; Solo 401(k) / Individual-K; Profit Sharing; Money Purchase Pension; Defined Benefit Pension." (Appleby Retirement Dictionary)

[Opinion] Comments of American Benefits Council on Draft of the Retirement Improvements and Savings Enhancements (RISE) Act10 pages. "[A]n employer would be permitted to make matching contributions under a 401(k) plan, 403(b) plan, or SIMPLE IRA with respect to 'qualified student loan repayments,' which are broadly defined as repayments of any indebtedness incurred by the employee solely to pay qualified higher education expenses of the employee (emphasis added) (expenses of a dependent would not be covered).... We applaud the innovation ... [Another] proposal would eliminate the ability of many plan and IRA beneficiaries to receive benefits over a period longer than five years.... [This] will in many instances reduce retirement savings for beneficiaries." (American Benefits Council)

[Guidance Overview] IRS Publication 4286: SARSEP Checklist (PDF)Revised Nov. 2016. "Every year it's important to review the requirements for operating your Salary Reduction Simplified Employee Pension (SARSEP) plan. Use this checklist to help you keep your plan in compliance with many important rules. For additional information (including examples) on how to find, fix and avoid each mistake click on [a link in the text of this Checklist].' " (Internal Revenue Service [IRS])

[Guidance Overview] IRS Publication 4285: SEP Checklist (PDF)Revised Nov. 2016. "Every year it's important that you review the requirements for operating your Simplified Employee Pension (SEP) plan. Use this checklist to help you keep your plan in compliance with many of the important rules. Click on '(More)' in any of the questions for additional information (including examples) on how to find, fix and avoid each mistake." (Internal Revenue Service [IRS])

[Official Guidance] Text of IRS News Release IR-15-118: 2016 Pension Plan Limitations (PDF)"In general, the pension plan limitations will not change for 2016 because the increase in the cost-of-living index did not meet the statutory thresholds that trigger their adjustment. However, other limitations will change because the increase in the index did meet the statutory thresholds. The highlights of limitations that changed from 2015 to 2016 include the following:

[1] For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple's income is between $184,000 and $194,000, up from $183,000 and $193,000.

[2] The AGI phase-out range for taxpayers making contributions to a Roth IRA is $184,000 to $194,000 for married couples filing jointly, up from $183,000 to $193,000. For singles and heads of household, the income phase-out range is $117,000 to $132,000, up from $116,000 to $131,000.

[3] The AGI limit for the saver's credit (also known as the retirement savings contribution credit) for low- and moderate-income workers is $61,500 for married couples filing jointly, up from $61,000; $46,125 for heads of household, up from $45,750; and $30,750 for married individuals filing separately and for singles, up from $30,500."

[Full details of all tax-related cost-of-living adjustments for 2016 are available in Rev. Proc. 2015-53.]

(Internal Revenue Service [IRS])

[Guidance Overview] IRS Tax Forum Transcript: SEP and SIMPLE IRA Plans -- Avoiding Pitfalls (PDF)32 pages. "What [this presentation will] do today is take you on a tour of both plans, providing to you the similarities and differences when it comes time to choose and establish one of these plans. Then the tour will continue to discuss about the participation requirements of both plans. And finally, as the title suggests, we'll get into the pitfalls or the recurring errors that we find in our examinations of these plans. [The presenter will] describe each error and then share with you how to find, fix, and avoid these common errors." [Also available:13 presentation slides.] (Internal Revenue Service [IRS])

[Guidance Overview] IRA Aggregation Rule and Pro-Rata IRA Taxation"Fortunately, ... the IRA aggregation rules do not apply when calculating substantially equal periodic payments (SEPP) under Section 72(t), reducing the danger that a withdrawal from one IRA could constitute a 'modification' of the ongoing 72(t) distributions from another that would trigger a retroactive penalty. However, even in the case of SEPPs, the IRA aggregation rules will still apply in determining how much of a 72(t) payment constitutes a tax-free return of non-deductible contributions!" (Michael Kitces in Nerd's Eye View)

[Guidance Overview] IRS SEP Fix-It Guide (PDF)19 pages, updated March 4, 2015. "Any employer -- including a sole proprietorship, partnership, corporation and nonprofit organization -- with one or more employees may establish a SEP plan. This includes a self-employed business owner, regardless of whether he or she is the only employee of the business. Individual employees may not establish a SEP plan." [Includes a one-page chart identifying mistakes and corrective actions.] (Internal Revenue Service [IRS])

Do I Have a Required Distribution From My IRA This Year?"We are down to the last two months of the year. It is time for those who have required minimum distributions (RMDs) from a retirement plan to make sure that those distributions are taken.... [1] Individuals age 70-1/2 or older by December 31 of the year.... [2] Individuals who have set up a 72(t) distribution plan.... [3] Beneficiaries of all retirement accounts.... [4] Deceased account owners." (Slott Report)

Five Retirement Account Creditor Protection Myths ... And the Real Facts"Myth #1: Retirement money is universally protected from creditors ... Myth #2: Plan money is always creditor protected ... Myth #3: General creditor protection and bankruptcy protection are the same ... Myth #4: Retirement account beneficiaries have the same levels of protection as owners ... Myth #5: Plan money retains its creditor protection when it's rolled over to an IRA." (The Slott Report)

IRS Expected to Require Aggregating IRA Types for Rollover Limitation"Based on new communications with the IRS, it now appears the IRS has reconsidered that position and believes that aggregating Traditional, Roth, and SIMPLE IRAs into a combined one-rollover limitation better reflects Congress' intended safeguards against abusive use of IRA assets as de facto lending instruments." (Ascensus)

[Official Guidance] Text of IRS Partial Withdrawal of Proposed Regs which Had Allowed More Than One IRA Rollover Per Year"As of [July 11, 2014], the proposed amendment to Section 1.408-4(b)(4)(ii), published Tuesday, July 14, 1981 (46 FR 36198), is withdrawn ... The IRS intends to follow the [Tax Court] opinion in Bobrow and, accordingly, is withdrawing paragraph (b)(4)(ii) of Section 1.408-4 of the proposed regulations and will revise Publication 590. This interpretation of the rollover rules under section 408(d)(1)(B) does not affect the ability of an IRA owner to transfer funds from one IRA trustee or custodian directly to another, because such a transfer is not a rollover and, therefore, is not subject to the one-rollover-per-year limitation of section 408(d)(3)(B).... [T]he IRS will not apply the Bobrow interpretation of section 408(d)(3)(B) to any rollover that involves a distribution occurring before January 1, 2015." (Internal Revenue Service [IRS])

[Guidance Overview] SARSEP Checklist, Updated March 27, 2014 (PDF)"Every year it is important that you review the requirements for operating your Salary Reduction Simplified Employee Pension (SARSEP) plan. Use this checklist to help you keep your plan in compliance with many of the important rules." (Internal Revenue Service [IRS])

IRS Allows Improper Retirement Plan Deductions Worth Millions, Inspector General Says"For tax year 2011, approximately 200 taxpayers who did not file a Schedule C, E or F to report their net earnings from self-employment claimed more than $2 million in SEP deductions on line 28 of Form 1040.... Reporting net earnings from self-employment is a requirement for taking a SEP deduction on line 28, [the Treasury Inspector General for Tax Administration] noted." (Accounting Today)

[Guidance Overview] IRS Retirement News for Employers, February 24, 2014 (PDF)Topics include: [1] You can still set up a SEP by the due date (including extensions) of your 2013 business income tax return; [2] Tips for the sole proprietor; [3] Saver's Credit for contributing to an IRA or company retirement plan by April 15, 2014; [4] How to correct missing or late distribution of safe-harbor 401(k) notice; [5] Retirement plan deadlines; [6] Consider your Roth options; and [7] My RA program information Fact Sheet, FAQs and video in English and Spanish. (Internal Revenue Service)

[Guidance Overview] From the IRS: SEP Plan Checklist and Fix-It Guide (PDF)20 pages. Includes a chart of how to identify, fix and avoid common mistakes, along with detailed explanations of SEP operations. Updated January 2014. Excerpt: "Use this checklist to help you keep your plan in compliance with many of the important rules.... If you answered 'no' to any of the above questions, you may have a mistake in the operation of your SEP plan. this list is only a guide to a more compliant plan, so answering 'Yes' to each question may not mean your plan is 100% compliant. Many mistakes can be corrected easily, without penalty and without notifying the IRS." (Internal Revenue Service)

Rebound in Retirement Plan Balances and Contributions Despite the Economic Downturn"The average contribution to [SEP-IRA, Self-Employed 401(k) or SIMPLE-IRA savings plan] accounts increased across the board since 2007, with those using Self-Employed 401(k)s showing the largest increase of 21 percent to $20,950. Employer contributions to SEP-IRAs increased 14 percent from 2007, reaching $13,250 in at the end of 2012, while average employer/employee contributions to SIMPLE-IRAs increased the least, rising 4 percent to $6,000." (Fidelity Investments, via BusinessWire)

[Official Guidance] IRS Retirement Plan Fix-It GuidesGuides are provided for 401(k) plans, 403(b) plans, SARSEPs, SEPs and SIMPLE IRAs. Excerpt: "Each guide provides: an overview of the rules for each plan type, an overview of the Employee Plans Compliance Resolution System, the most frequent errors we find in each plan type and tips on how to find, fix and avoid these mistakes." (Internal Revenue Service [IRS])

Small Businesses Can Still Fund a SEP IRA for 2012"SEP IRAs can be established and funded as late as the business owner's tax filing deadline, including extensions. This means that your clients still have time to establish and fund a SEP IRA for 2012.... The maximum amount that can be contributed to an employee's account is the lesser of 25% of the employee's compensation- such as W-2 wages, or $50,000. For this purpose, compensation is capped at $250,000. Further, the percentage is reduced to 20% of the individual's modified net profit, for those whose contribution is based on Schedule C income." (Appleby Retirement Consulting Inc.)

[Official Guidance] Text of IRS Rev. Proc. 2013-12: Update and Restatement of the Employee Plans Compliance Resolution System (PDF)"This revenue procedure updates the comprehensive system of correction programs for sponsors of retirement plans that are intended to satisfy the requirements of Section 401(a), 403(a), 403(b), 408(k), or 408(p) of the Internal Revenue Code ... but that have not met these requirements for a period of time. This system, the Employee Plans Compliance Resolution System ('EPCRS'), permits Plan Sponsors to correct these failures and thereby continue to provide their employees with retirement benefits on a tax-favored basis. The components of EPCRS are the Self-Correction Program ('SCP'), the Voluntary Correction Program ('VCP'), and the Audit Closing Agreement Program ('Audit CAP').... This revenue procedure modifies and supersedes Rev. Proc. 2008-50, 2008-2 C.B. 464, the prior consolidated statement of the correction programs under EPCRS." [Revenue Procedure 2013-12 will be published in Internal Revenue Bulletin 2012-4 on January 22, 2013.] (Internal Revenue Service)

[Guidance Overview] SEP vs. SIMPLE IRA 2012"Small business owners, who like the simplicity and low administrative costs associated with simplified employee pension (SEP) IRAs and savings incentive match plan for employees of small employers (SIMPLE) IRA plans, often find it hard to choose between the two. An understanding of the features and benefits of these plans can help to make the choice easier. [This] Quick Reference Guide provides a comparison of some of the key features and benefits of these plans." (Appleby Retirement Dictionary)

IRS to Scrutinize IRAs, Increase Collection of Penalties"The government lets millions of dollars in tax penalties on IRAs go uncollected each year -- $286 million in 2006 and 2007 alone for missed withdrawals and contributions that break the rules. The reasons range from bureaucratic hurdles to tax forms that don't provide enough information, according to a report by the Treasury Inspector General for Tax Administration, the federal tax watchdog. Now the Internal Revenue Service, which has been cracking down on secret foreign accounts and beefing up audits of high earners in recent years, is turning its attention to IRA snafus." (The Wall Street Journal)

Partners Can't Have Individual SEP Plans, Says IRS"Partners or members of an LLC taxed as a partnership are considered employees for retirement plan purposes, and thus cannot have individual SEP plans, according to the IRS. Only an employer can maintain and contribute to a SEP plan for its employees." (Wolters Kluwer Law & Business)

IRS Advisory Committee Invites Service-Providers to Small Business Retirement Plans to Answer Survey by Year-EndExcerpt: "This [anonymous] survey is not being carried out or conducted by the IRS, but by the volunteer members of the ACT who advise the IRS on employee benefits issues. It is for informational purposes only and will assist the ACT in making recommendations to the IRS about how it may enhance its relationship with small employers and the compliance efforts of their retirement plans." (IRS Advisory Committee on Tax Exempt and Government Entities)

IRS Advisory Committee Invites Small Business Retirement Plan Sponsors to Answer Survey by Year-EndExcerpt: "This [anonymous] survey is not being carried out or conducted by the IRS, but by the volunteer members of the [Advisory Committee] who advise the IRS on employee benefits issues. It is for informational purposes only and will assist the ACT in making recommendations to the IRS about how it may enhance its relationship with smalls that maintain employer retirement plans." (IRS Advisory Committee on Tax Exempt and Government Entities)

[Official Guidance] IRS 'SEP Plan Pitfalls' Phone Forum Is Today at 2 p.m. Eastern TimeExcerpt: "Join Mikio Thomas from Employee Plans Customer Education and Outreach and Avaneesh Bhagat from Employee Plans Voluntary Compliance for this 90-minute presentation where you will learn how to use the IRS SEP Plan Fix-It Guide to identify and correct mistakes the IRS frequently sees in SEP plans. In addition, the IRS will provide tips you can share with your clients on how they can avoid these errors in the future." (Internal Revenue Service)

[Guidance Overview] Book Excerpt: Contingent Workers & Employee Benefits (PDF)57 pages. Excerpt: "This chapter discusses how the courts have dealt with the Code and ERISA in ascertaining: whether and under what circumstances contingent workers have been found eligible to participate in a service recipient's benefit plans; and whether a service recipient is in fact the actual employer in cases where the contingent worker was employed by a [Professional Employer Organization]." (Daniel N. Janich, Esq. of Greensfelder law firm; from BNA's book, 'ERISA Litigation,' copyright 2008)

Simplified Pension Plan Lets Money Go in and Out at the Same TimeExcerpt: "Unlike the rules for traditional individual retirement accounts, you receive a real break here for your self-employed status in your simplified employee pension plan, said Ed Slott, an IRA expert who has a Web site at www.irahelp.com. You can keep contributing even though you are required to withdraw, he said. 'It's a quirky thing. With traditional IRAs, contributions have to stop once you start taking required withdrawals,' Slott said. 'But with self-employed plans, there's no end as long as you have earnings from the business.'" (Chicago Tribune)

Small Businesses Face Deadlines for SEPs, SIMPLEsExcerpt: "Small business owners who are thinking about setting up retirement plans for their employees should be aware that there are two important deadlines coming up in October that affect the plans known as SIMPLEs and SEPs." (USA TODAY)

[Official Guidance] Aug. 14 Special Edition of IRS Employee Plans News: Announcing Rev. Proc. 2008-50, Including Survey to Practitioners (PDF)2 pages. Excerpt: "[The] Self-Correction Program . . . has been expanded with respect to employers who discover failures in their plans and have begun the correction process. The time by which a plan sponsor substantially corrects a significant operational failure, and is thereby entitled to use SCP, has been liberalized . . . . [Excess annual additions in DC plans under section 415] will be corrected in accordance with the provisions of this revenue procedure . . . . Streamlined Voluntary Correction Program Application Procedures . . . have been significantly expanded to include the following failures: . . . " (Internal Revenue Service)

[Official Guidance] Text of Rev. Proc. 2008-50: Employee Plans Compliance Resolution System, Updating and Expanding Rev. Proc. 2006-27 (PDF)179 pages; the document's table of contents does not include page numbers, but it is the version released to the public today. See pages 8 through 10 for a summary of the modifications being made to the previous version of EPCRS (Rev. Proc. 2006-27). Excerpt: "This revenue procedure updates the comprehensive system of correction programs for sponsors of retirement plans that are intended to satisfy the requirements of § 401(a), 403(a), 403(b), 408(k), or 408(p) . . . but that have not met these requirements for a period of time. . . . This revenue procedure modifies and supersedes Rev. Proc. 2006-27." (Internal Revenue Service)

[Guidance Overview] Taxpayer Required to Include SEP Distribution in Gross Income, According to Tax CourtExcerpt: "A taxpayer was required to include in his gross income a $25,000 distribution from his individual retirement account-based simplified employee pension (SEP) that the taxpayer failed to roll over to another IRA. In addition, the taxpayer was liable for the IRC Sec. 72(t) 10% additional tax on premature distributions. These were the conclusions of the U.S. Tax Court in Atkin v. Commissioner (Docket No. 5266-05. T.C. Memo. 2008-93)." (Wolters Kluwer)

[Opinion] The Payroll IRA Plan of S. 1141 and H.R. 2167: It's PIP – Or Is It?Excerpt: "An idea that has been wafting about in legislative halls and hearing rooms, in print and electronic media, and in assorted other venues for several years is to make employers in small businesses set up a payroll deduction facility for their employees not covered by employer-sponsored retirement plans, for the purpose of easing the making of contributions to an IRA established by or on behalf of the employee. . . . The PIP is more than just an idea. It has been embodied in several federal legislative proposals . . . . H.R. 2167 was one of the main topics discussed at a recent hearing on IRAs by the Ways & Means Committee's subcommittee on Select Revenue Measures, which has moved the legislation into the spotlight." (Alvin D. Lurie, Esq.)

[Guidance Overview] Tax Court Case Upholding IRS's Disallowance of Deductions for Contributions to Faulty SEPExcerpt: "Know how the attribution rules under Section 318 of the Internal Revenue Code can sometimes wreak havoc for employers under the controlled group provisions? The taxpayer here tried to apply his 'creative' interpretation of the attribution rules by arguing that it didn't matter that contributions were not made for the wife because the SEP contributions made on behalf of the husband should be 'attributed' to the wife. It is no surprise that the Tax Court didn't buy that argument." (Attorney B. Janell Grenier via Benefitsblog.com)

[Opinion] A Reconsideration of Tax Expenditure Analysis (PDF)87 pages. Excerpt: "This document, prepared by the staff of the Joint Committee on Taxation . . . reconsiders the utility of the JCT Staff's current implementation of tax expenditure analysis. . . . Driven off track by seemingly endless debates about what should and should not be included in the 'normal' tax base, tax expenditure analysis today does not advance either of the two goals that inspired its original proponents: clarifying the aggregate size and application of government expenditures, and improving the Internal Revenue Code." (U.S. Congress, Joint Committee on Taxation)

Small Employers and SEP-IRAs Can Be a Good MatchExcerpt: "SEP-IRAs deliver retirement benefits without the higher cost and administrative burden of 401(k)s. Employers contribute to them on behalf of workers once per year, based on the performance of the company. There is no set contribution rate, unlike the standard practice of employee payroll deductions and guaranteed company matches in 401k(s). SEP-IRAs are most commonly used by small businesses owners, such as consultants, realtors, psychologists, IT contractors or physician groups." (Employee Benefit News; free registration required)

IRS Announces Pension Plan Limitations for 2008; 402(g) Elective Deferral Limit Still $15,500Excerpt: "The annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased from $225,000 to $230,000. The dollar limitation under Section 416(i)(1)(A)(i) concerning the definition of key employee in a top-heavy plan is increased from $145,000 to $150,000. . . . The limitation used in the definition of highly compensated employee under Section 414(q)(1)(B) is increased from $100,000 to $105,000. . . . Administrators of defined benefit or defined contribution plans that have received favorable determination letters should not request new determination letters solely because of yearly amendments to adjust maximum limitations in the plans." (Internal Revenue Service)

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